Correlation Between Great Lakes and Orion Group

Can any of the company-specific risk be diversified away by investing in both Great Lakes and Orion Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Great Lakes and Orion Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Lakes Dredge and Orion Group Holdings, you can compare the effects of market volatilities on Great Lakes and Orion Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Great Lakes with a short position of Orion Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and Orion Group.

Diversification Opportunities for Great Lakes and Orion Group

0.33

Correlation Coefficient

Great Lakes  Orion Group

Weak diversification

The 3 months correlation between Great and Orion is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Orion Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Group Holdings and Great Lakes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Great Lakes Dredge are associated (or correlated) with Orion Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Group Holdings has no effect on the direction of Great Lakes i.e., Great Lakes and Orion Group go up and down completely randomly.

Pair Corralation between Great Lakes and Orion Group

Given the investment horizon of 90 days Great Lakes is expected to generate 1.03 times less return on investment than Orion Group. But when comparing it to its historical volatility, Great Lakes Dredge is 2.24 times less risky than Orion Group. It trades about 0.23 of its potential returns per unit of risk. Orion Group Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  691.00  in Orion Group Holdings on August 31, 2024 and sell it today you would earn a total of  186.00  from holding Orion Group Holdings or generate 26.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Great Lakes Dredge  vs.  Orion Group Holdings

Great Lakes Dredge

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Lakes Dredge are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Great Lakes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Orion Group Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orion Group Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Orion Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Lakes and Orion Group

The main advantage of trading using opposite Great Lakes and Orion Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes position performs unexpectedly, Orion Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Orion Group will offset losses from the drop in Orion Group's long position.

The idea behind Great Lakes Dredge and Orion Group Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.